Michigan auto insurance premiums are among the highest in
the nation. The American Association of Retired Persons, in a recent survey,
found that Michigan's premiums were the second highest in the nation, behind
only Louisiana.[1] This, combined with a statutory requirement to purchase
insurance, has led to legislative attempts to keep premiums down. Unfortunately,
state lawmakers have pursued an approach that includes price controls,
regulation of how premiums may be set, and requirements for insurance companies
to provide specific types of coverage. As the famous Austrian economist Ludwig
von Mises pointed out decades ago, this kind of government intervention, while
well-intended, leads to unintended consequences that then lead to further
government interventions, further unintended consequences, in a lengthy cycle
with results that no legislator would have expected at the beginning.[2]

Rather than attempting to regulate insurance company and
individual behavior, Michigan legislators would much better serve the people
they represent by examining why insurance premiums are so high in the first
place, in order to address the problem at its source. A careful study of
Michigan's insurance market and the regulations governing it indicates that
no-fault insurance and the legislative requirement for individuals to purchase
unlimited personal injury protection are two important reasons for the
increased costs of providing insurance coverage in Michigan. The good news is
that it is possible to reduce these costs and reduce the number of drivers who
take the risk of violating the law and do not purchase insurance.